A new study underscores the importance of a “growth mindset” in entrepreneurs when faced with business challenges. Specifically, the study shows that entrepreneurs who think they can change their views on conserving or spending business resources are more resilient when faced with venture-related setbacks.

“Entrepreneurs face setbacks, but we don’t know a lot about what influences how entrepreneurs respond to those setbacks,” says Jeff Pollack, corresponding author of the study. “We also know that some people believe frugality is a fixed personality trait that doesn’t change, while other people have more of a growth-oriented mindset – meaning they think individuals can become more frugal over time.

“We wanted to see if peoples’ beliefs about frugality affect how they respond to setbacks that are related to their venture experiences – particularly with regard to their subsequent negative feelings, future optimism and coping,” says Pollack, who is the Lynn T. Clark II Distinguished Professor of Entrepreneurship in the Poole College of Management at North Carolina State University.

“Our findings suggest that people who believe they can change with regard to frugality are better able to adapt to setbacks than people who believe that their personality traits associated with frugality are fixed and can’t be changed,” says Jon Carr, co-author of the study and the Jenkins Distinguished Professor of Entrepreneurship at NC State.

To explore the issue, the researchers recruited 709 entrepreneurs to participate in an online survey. Study participants were told the definition of frugality and answered a range of questions designed to capture their baseline views on frugality. Participants were then asked to remember a time when their entrepreneurial venture faced a setback, after which they were asked a series of questions designed to capture how they responded to that setback in terms of how they felt, thought and coped with the challenge.

“We found a strong association between growth mindset and the ability to adapt to challenges,” says Pollack. “The stronger someone’s growth mindset with regard to frugality, the more optimistic they were about future success, the less discouraged they were, and the more effort they put into identifying solutions to their setback.”

“In short, the growth mindset of frugality was associated with adaptability and a desire to make positive adjustments, as opposed to feeling miserable and getting stuck,” says Carr.

The researchers replicated the study with an additional 281 study participants. The second study’s findings were consistent with the first study.

“Mindsets really matter when we face setbacks – and everyone faces setbacks,” says Pollack. “But mindsets can be changed. Entrepreneurs and organizations that support entrepreneurs should be aware of mindsets and take steps to improve mindsets in a way that will make entrepreneurs more resilient to challenges.”

“The real takeaway is that you can do something about this,” says Carr. “Having the right mindset matters.”

The paper, “A stronger growth mindset of frugality predicts entrepreneurs’ responses to setbacks in resourcefulness behavior,” is published open access in the Journal of Business Venturing Insights. The paper was co-authored by Jeni Burnette, a professor of psychology at NC State; Tim Michaelis, an assistant professor of psychology at NC State; Joseph Billingsley, an assistant professor of psychology at Marshall University; and David Scheaf, the Robert M. and Louise Rogers Chair of Entrepreneurship at Baylor University.